Standard & Poor’s places Horizon Lines on creditwatch

Standard & Poor’s places Horizon Lines on creditwatch    Standard & Poor’s Ratings Services has placed its ratings, including its ‘BB-‘ corporate credit rating, on Horizon Lines LLC “on CreditWatch with negative implications.”.
   “The CreditWatch placement follows the recent announcement that the Carlyle Group has entered into an agreement to sell its interest in Horizon Lines to Castle Harlan Inc.,” Standard & Poor’s Ratings Services said.
   Horizon Lines is a U.S.-flag ocean shipping and logistics technology company based in Charlotte, N.C. The Carlyle Group, in Washington, D.C., and Castle Harlan, in New York, are private equity firms.
   “Castle Harlan’s purchase price for Horizon Lines is $650 million, compared with the $315 million paid by the Carlyle Group in 2003,” said Kenneth L. Farer, associate director, corporate and government ratings, for Standard & Poor’s Ratings Services.
   “If the acquisition is financed with a substantial amount of debt, Horizon Lines’ credit profile may weaken to a level no longer consistent with the current rating,” Farer said.
   Standard & Poor’s Ratings Services said it will meet with the management of Castle Harlan “to discuss the acquisition and financing plans, and the resultant credit profile, to resolve the CreditWatch.”
   Standard & Poor’s Ratings Services said its ratings on Horizon Lines reflect the company’s “high debt leverage, participation in the capital-intensive and competitive shipping industry, and relatively older fleet.”
   Horizon Lines’ “operating margins before depreciation and amortization have averaged 13 percent over the past few years, adequate for a shipping company. ” Also, “margins have increased gradually as market conditions in Puerto Rico strengthened. However, “future credit measures will be determined by acquisition financing,” Standard & Poor’s Ratings Services said.
   “This is nothing unusual and nothing to be concerned about,” said Charles G. 'Chuck' Raymond, chairman, president and chief executive officer of Horizon Lines. “It is standard procedure when a company goes through refinancing that could involve more debt to put it on CreditWatch. It does not mean in any way that the company is at risk. It simply means that the rating of its debt, used to price bonds and other debt, will be reviewed. The company will be doing this with Standard & Poor’s and Moody’s next Tuesday.”